RBC sets sight on possible Origin asset sales

This is an edited selection of today’s best postings on Street Talk, which is updated throughout the day on AFR.com.

With Origin Energy in fundraising mode to help meet its $4.4 billion commitment for the Australia Pacific LNG project in Queensland, RBC Capital markets has taken a look at potential asset sales, with the APLNG pipeline and the Ironbark coal seam gas resource coming out top of the list.

A sale of the APLNG gas pipeline, already aired by Origin boss Grant Kingas a possibility, could raise between $380 million and $470 million, RBC reckons, assuming the construction of the line is half complete.

At Ironbark, RBC says a farm-out could be possible given Origin has categorised the asset as a post-APLNG growth option due to a lack of immediate available funds for development. Santos, the GLNG venture, AGL Energyor EnergyAustralia could be interested in buying of farming into the acreage, which Origin bought in 2009 for $660 million.

AGL’s increasing problems in developing its coal seam gas acreage in NSW plus its balance sheet capacity make it a favourite, but EnergyAustralia, which formed a joint venture with Santos in 2011 to acquire Eastern Star Gas could also be there, RBC says. Meanwhile, Santos is pursuing third party gas purchases to get more gas for GLNG so provides another candidate.

Origin is also set to benefit from rising gas prices on the east coast, with RBC calculating that a $1 per gigajoule increase in the gas price equates to 4-6 per cent upside in earnings per share for the company.

All up, RBC reckons that balance sheet risks for Origin are declining and has upgraded the stock to “outperform", citing a $14.50 price target, compared to Monday’s close of $13.13.